Impacts of Brexit, E-commerce, and Sustainable Development on the UK Construction Industry

PWC predictions of the impact of Brexit on the construction sector

With the advent of Brexit and the triggering of Article 50 the business environment is facing a heightened level of uncertainty. Pricewaterhouse Coopers (PWC) predicted that the construction sector will suffer the most from lower investment levels (UK Economic Outlook November 2016).  The Royal Institution of Chartered Surveyors in a report argued that almost 200,000 construction jobs could be slashed if Britain loses access to the European single market, jeopardising billions of pounds worth of infrastructure projects and dealing a sharp blow to major UK cities’ global competitiveness (Independent, Friday 21 April 2017).  The lack of access to single European market will mean that the UK will lose its attractiveness as an export platform for multinationals. Subsequently, multinationals’ management of their supply chains would become more difficult as component parts would be subject to different regulations and costs.

Aside from the implications of Brexit, the retail sector is also facing a challenging time due to the growing importance of e-commerce; not only competition from out-of-centre large retail development but the rapid growth of online sales has caused transformation of major retailers into ‘bricks and clicks’.  The Independent newspaper (Tuesday 28 May 2013) reported that ‘Online retail to hit the high street, as its revealed one in five shops 'could close by 2018'. Online sales have increased by 18% year on year in the UK - indeed, according to an article in the daily mail, 82% of British internet users regularly shop online. The rise in ‘click and collect’ services, means that the need for large warehouse stocks and inventories is increasing (www.drapersjobs.com). Many clients are seeking to become e-resilient.

Furthermore, the legal and institutional context of property development has undergone noticeable changes; for example, town planning practices of post Second World War in the UK which promoted large, single-use buildings such as shopping centres, have given way to the more recent Planning Policies (National Planning Policy Framework, NPPF) with the aim of revitalising urban centres and generating benefits for the community (e.g. reduced demand for transport, and other infrastructure, local employment opportunities, more interesting urban fabric and enhanced property values are in favour of Mixed-use Developments.  The UK Sustainable Development Strategy Securing the Future set out five ‘guiding principles’ of sustainable development: living within the planet’s environmental limits; ensuring a strong, healthy and just society; achieving a sustainable economy; promoting good governance; and using sound science responsibly.

The construction industry is a producer of ‘public goods’ which are mainly used in the production of other goods (e.g. think of a factory that produces cars and without the physical structure of a factory no car can be produced). Apart from the buildings produced by the private sector, the UK Government also commission buildings (public and merit goods such as hospitals, education buildings, roads, infrastructure, bridges, dams etc.). The production of public sector construction is encouraged through public/private partnership agreements (PPP, PFI, BOOT etc.). The potential benefits of PFI are regarded as efficiency gains in the delivery of a project.  HM Treasury considers that the risk transfer to the private sector can result in benefits which can outweigh the higher financial costs. The potential benefits such as cost certainty, improved operational efficiency, and higher quality are some of the key drivers for the continued use of PFIs.

Challenges faced by the retail sector due to e-commerce

LO1 Appreciate the variety of environmental contexts within which construction companies operate

LO2 Understand the importance of briefing the client

LO3 Understand the process of selecting the consultants and the contractor.

LO4 Analyse various procurement strategies of the building process

LO5 Advise on methods of procurement to meet the needs of specific clients/projects and evaluate the available alternatives

LO6 Understand the project management process from inception through to completion

1- There is a topic in presentation and define its Characteristics (e.g. commercial/industrial/housing or sport - see Table 1) of a value up to approx. £5m either as a new build, repair, alteration, or upgrade works in the current economic environment.

2-Decide on the type of your client (e.g. private/public; experienced/inexperienced, individual/organisation, etc.) and their attitude toward risk (e.g. risk averse/risk taker).

This part of the assessment focuses on your understanding of procurement methods and the reasons behind their selection given the project specific factors.

Recent reports indicate, that in the modern world, client satisfaction is increasingly dependent upon the selection of the most appropriate procurement methodology and that failure to select an appropriate procurement approach can be a primary cause of project failure (Morledge and Smith, 2013, p6). Structured methodologies, tools and models of various types to aid the process have been documented (ibid, p7) but studies indicate that these are not sufficient to replace the benefits of deeper mutual understanding of the organisational and performance goals of the parties involved. Since the 1990s, there is also an increased focus on the issues of complexity and the difficulties of the context in which the project is developed and constructed that may lead to unsatisfactory performance of the construction industry in terms of its ability to deliver on time, within budget and to the expected quality and performance standards place the role of the client in construction procurement firmly in the spotlight (ibid, p9). Project success and client satisfaction are likely to be interdependent but to achieve them the project team needs to fully understand the design and construction processes from inception to completion.

Using the same scenario as you developed in A1 part (a) critically analyse factors that impact the selection of the procurement method, selection of contractor and sub-contractors to secure the success of the project. In particular report on the following:

1- Review of literature comparing and evaluating different procurement methods;

2- Justify the selected procurement route given your client and project characteristics;

3- Review of literature on the evaluation of competitive and negotiated approaches in the selection of the main contractor;

4- Review of literature on the evaluation of the role of sub-contractors and comparison of the differences between nominated, domestic and named subcontractors.